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Admirers call Burke classic entrepreneur; critics say he's abrasive and dictatorial
Star Tribune: Newspaper of the Twin Cities
November 4, 1987
Author: Gordon Slovut; Staff Writer

An admirer describes Richard Burke, the man who built United HealthCare into one of the nation's biggest HMO management companies, as a visionary, a "classic entrepreneur," a man who knows how to stay one jump ahead of the competition.

A critic says most doctors consider Burke, who is selling control of the Minnesota-based company to a New York corporation, as arrogant, abrasive, unfeeling and dictatorial.

And one of the Burke's competitors, George Halvorson, president of Group Health Inc., said it appears to him that Burke has decided to take his money and fade from the Minnesota health-care scene.

Burke, 43, said his backers and critics have it all wrong, at least about his future. He is not going to fade away, and he didn't really need the money from the stock sale, he said.

"I am staying as chairman of the board, and that role in our company is a significant one," he said.

Halvorson said a revolt by some of the 4,000 doctor-members of Physicians Health Plan, the HMO managed by United, "changed the ball game." He said the rebellion made it clear that Burke's "management style is not likely to work anymore."

The admirer is Dr. Paul Ellwood, who as head of the health research organization InterStudy brought the young Burke (who had just completed work on a Ph.D. in business at the University of Virginia) to Minneapolis in 1971 as a health analyst.

The critic is Dr. Richard Reece, a Minneapolis pathologist turned newsletter writer who focuses on "the corporate transformation of American medicine."

"I think Rich realizes there was no point in staying and jeopardizing the value of his stock," Halvorson said. "It makes sense to sell it and let another approach be tried."

Halvorson said enough stock for a controlling interest in United had been for sale for more than a year.

Added Reece: "Richard Burke's problem with doctors is that he regards them as tools that make his mission possible. He truly believes he is a visionary who will change the nature of the health care market. He believes it is a marketplace, that there is a glut of physicians and hospitals and there is something noble about United HealthCare rationalizing medical care, reducing hospital beds."

He and Ellwood agreed that Burke, as much as anyone, has been responsible for forcing hospitals to economize by shutting down nursing stations, and doctors to make much less use of hospitals.

Burke said he is selling 1.5 million of his shares - retaining 1.7 million - reluctantly only because the Warburg, Pincus Capital Co. insisted that it, not he, be the single largest stockholder.

He said that he enjoyed being the undisputed leader of both PHP and United for years, but that that era is over. Burke moved to PHP in the mid-1970s when it was losing money. He brought costs under control after he and Steve Goldstone, another former InterStudy researcher, started MedCenters Health Plan for what was then the St. Louis Park Medical Center.

"Do I enjoy being king?" Burke asked. "Yes, that's fun."

He said he thinks the "antipathy of doctors has been overdone."

Some doctors have been complaining that PHP didn't pay them enough for treating PHP patients and that it interfered with the practice of medicine by limiting hospital admissions. The rebellion was settled when the rebellious doctors were given representation on PHP's board of directors.

Burke said he will spend less time working. "No more 12- or 13-hour days," he said. And more time doing things, such as fishing and bird hunting, with his four sons, Ryan, 14; Taylor, 16; Mitch, 22, and Robin, 23.

Ellwood said he doubts that Burke will withdraw much from the industry.

"He has an uncanny ability to figure out what is going to happen next," Ellwood said. "Honeywell was upset (about a year ago) with what it was paying for health care and decided to push the HMOs, including PHP, out, as far as salaried personnel were concerned. Burke came in with United, which knows how to manage health care, and runs the Honeywell company plan."

As a result, United collects management fees from Honeywell rather than from PHP, which is nonprofit, Ellwood said.

"Burke figured that more and more employers will figure they can do better than HMOs, so he will give them in-house HMO management skills, and that whole movement is spreading across the country," Ellwood said.

He said United and PHP came up with a computerized way to control the high cost of drugs. They limit dispensing pharmacies to those that agree to bill PHP at wholesale rates, and demand - and get - reimbursement from the drug manufacturers for keeping their drugs on the approved drug list, Ellwood said.

"Rich saw that competitors in other cities were copying his plan, so he began selling their (United's) drug management system to his competitors," he said.

Reece said doctors who blame Burke for their drops in income are not going to be persuaded easily that their troubles are over. He said that their morale has improved because the PHP Oversight Committee won concessions from the people who were running the plan, but that there is a feeling that "Burke will be behind the curtains, pulling the levers."

Burke said he thinks that his critics give him credit for too much.

"It's always tempting to give the head of a company or a quarterback too much credit for successes and too much discredit for failures," he said. "I have brought in some very fine managers."

Ellwood said he doesn't think there will be any real changes in PHP, the health plan that covers about 400,000 Minnesotans.

He said that there might be more competition from small doctor-hospital prepayment plans but that those plans will be in danger of pricing themselves out of the market if they don't have the kind of controls PHP has on what doctors and hospitals do.

"If they do price themselves out of the market, that will open the way for United to manage (company health) plans as self-insurance plans," Ellwood said.
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Copyright (c) 1987, 2001 Star Tribune: Newspaper of the Twin Cities
Record Number:  155164